Published Date 8/17/2022
Treasuries and MBSs began weak this morning, the 10 yr. note yield at 9 am 2,87% +5 bps, MBS pries -28 bps.
Headline July retail sales were weaker than expectations, most of the weakness in auto sales. Sales were expected +0.1%, as released 0.0%, June revised lower, from +1.0% to +0.8%. Excluding vehicle sales expectations were -0.1%, as reported +0.4%; excluding vehicles and gas expectations were +0.3%, as released +0.7%. It is July data, recently the price of gas has declined about $0.75/gal in many areas. Sales at gasoline stations fell 1.8% in July, reflecting a steady retreat in gas prices from the record highs seen in mid-June. Purchases at motor vehicle and parts dealers dropped 1.6%. Nine of the 13 retail categories showed increases last month, according to the report, including building material stores, nonstore retailers and electronics. Prior to July, overall retail sales had risen every month this year. Consumer discretionary spending is solid enough to keep the Fed on a path of aggressive interest-rate hikes.
Last week MBA mortgage applications declined 2.3%, purchases down 0.8%, re-finances last week down 5.4% from the prior week.
At 9:30 am the DJIA opened -236, NASDAQ -136, S&P -34. 10 yr. at 9:30 am 2.88% +6 bps from yesterday. FNMA 5.0 30 yr. coupon at 9:30 am -28 bps and -29 bps from 9:30 yesterday. FNMA 4.5 30 yr. coupon -33 bps and -36 bps from 9:30 am yesterday.
At 10 am June business inventories, expected +1.4%, as reported +1.4%; sales +1.3%.
At 1 pm Treasury will auction $15B of 20 yr. bonds.
At 2 pm this afternoon the Fed will release the minutes from the July FOMC meeting. No change in markets that continue to debate how much the Fed will increase rates at the sept 21st FOMC meeting. News from media writing about opinions has focused more on the view the FOMC will increase just 50 bps and two 75 bp increases. The meeting is a long way off in this current climate; more inflation data yet to be revealed, more economic data still to come. The divergent opinions, 50 or 75, neither have a lot of underlying confidence currently, but stock investors presently hold the upper hand with stocks rallying, believing all will be well in coming months. Inflation will decline, there won’t be a recession is presently dominating thinking.
The U.K.’s annual rate of inflation moved into double digits in July and is set to rise even higher by the end of the year, threatening a lengthy economic contraction. The U.K.’s Office for National Statistics Wednesday said consumer prices were 10.1% higher in July than a year earlier, up from 9.4% in June. That was the highest rate of inflation in more than four decades and the fastest increase in prices recorded in one of the Group of Seven rich countries since the current surge started in early 2021. Figures to be released tomorrow by the European Union’s statistics agency are expected to show the Eurozone’s annual rate of inflation rose to 8.9% in July from 8.6% in June.
Technicals looking more bearish the last few days; (10 yr. note) this morning testing its key 40 day average at 2.88%, the yield hasn’t been above it since July 21st. The on-going uncertainty about what the Fed will do will keep the rate markets volatile in a narrow range until more inflation data is reported.
Source: TBWS
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